Self-employment and life satisfaction: The contingent role of formal institutions

Plain English SummaryStart your business and be happy. Our study shows that life satisfaction of entrepreneurs differs by country. Environments that protect assets and engage in less government spending tend to have self-employed individuals with higher life satisfaction. While research has often focused on the economic performance of entrepreneurs and their businesses, other non-financial factors, such as indicators of well-being, have more recently been emphasized. Based on 23,354 survey responses, we investigate differences in the relationship between life satisfaction and self-employment across 26 countries and one region. We found that in countries that have stronger asset protection and less government spending, the relationship between self-employment and life satisfaction is strengthened, which suggests that country-level influences (institutions) have profound effects on micro-level (well-being) outcomes. Thus, governments can influence the life satisfaction of individuals. Because a decline in entrepreneurial life satisfaction may dim a country's future growth, governments should be very cognizant of actions that affect their entrepreneurial community. Life satisfaction, a key indicator of well-being, is an important outcome of engagement in entrepreneurship. Drawing on uncertainty management theory, we develop a model in which property rights and government activity serve to modify the relationship between self-employment and life satisfaction across countries. Our multi-level study of 23,354 respondents in 26 countries and one region demonstrates that secure property rights positively moderate this relationship and government activity negatively moderates this relationship. Implications for theory and practice are discussed.